The subject of contention in this litigation is a valuable 17- story office building, located at 79 Madison Avenue in Manhattan. In dispute is the propriety of a complex series of transactions that had the net effect of permitting defendants, who were outside investors, to gain ownership of the property and to eliminate the ownership interests of plaintiffs, who were minority shareholders of the corporation that formerly owned the building. This was achieved through what is commonly known as a ‘‘two-step’’ merger: (1) an outside investor purchases control of the majority shares of the target corporation by tender offer or through private negotiations; (2) this newly acquired control is used to arrange for the target and a second corporation controlled by the outside investor to merge, with one condition being the ‘‘freeze-out’’ of the minority shareholders of the target corporation by the forced cancellation of their shares, generally through a cash purchase. This accomplishes the investor’s original goal of complete ownership of the target corporation.

   Since 1955, the office building was owned by 79 Realty Corporation (Realty Corporation), which had no other substantial assets. About two-thirds of Realty Corporation’s outstanding shares were held by two couples, the Kimmelmans and the Zauderers, who were also the company’s sole directors and officers. Plaintiffs owned 26% of the outstanding shares. The remaining shares were owned by persons who are not parties to this litigation.

   Defendants, a consortium of investors, formed a limited partnership, known as Madison 28 Associates (Madison Associates), for the purpose of purchasing the building. * * *

   Madison Associates formed a separate, wholly owned company, 28 Williams Street Corporation (Williams Street), to act as the nominal purchaser and owner of the Kimmelman and Zauderer interests. * * *

   [T]he partners of Madison Associates approved a plan to merge Realty Corporation with Williams Street, Realty Corporation being the surviving corporation. Together with a notice for a shareholders’ meeting to vote on the proposed merger, a statement of intent was sent to all shareholders of Realty Corporation, explaining the procedural and financial aspects of the merger, as well as defendants’ conflict of interest and the intended exclusion of the minority shareholders from the newly constituted Realty Corporation through a cash buy-out. Defendants also disclosed that they planned to dissolve Realty Corporation after the merger and thereafter to operate the business as a partnership. The merger plan did not require approval by any of the minority shareholders.

   The merger proposed by the directors was approved at the shareholders meeting, held on November 7, 1980. As a result, the office building was owned by the ‘‘new’’ Realty Corporation, which, in turn, was wholly owned by Madison Associates. In accordance with the merger plan, Realty Corporation was dissolved within a month of the merger and its principal asset, title to the building, devolved to Madison Associates.

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   The plaintiffs instituted this action * * * [seeking] rescission of the merger.

   The propriety of the merger was contested on several grounds. It was contended that the merger was unlawful because its sole purpose was to personally benefit the partners of Madison Associates and that the alleged purposes had no legitimate business benefit inuring to the corporation. Plaintiffs argue that the ‘‘business judgment’’ of the directors in assigning various purposes for the merger was indelibly tainted by a conflict of interest because they were committed to the merger prior to becoming directors and were on both sides of the merger transaction when consummated. Further, they assert that essential financial information was not disclosed and that the value offered for the minority’s shares was understated and determined in an unfair manner.

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   On this appeal, the principal task facing this court is to prescribe a standard for evaluating the validity of a corporate transaction that forcibly eliminates minority shareholders by means of a two-step merger. It is concluded that the analysis employed by the courts below was correct: the majority shareholders’ exclusion of minority interests through a two-step merger does not violate the former’s fiduciary obligations so long as the transaction viewed as a whole is fair to the minority shareholders and is justified by an independent corporate business purpose. Accordingly, this court now affirms.

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   In New York, two or more domestic corporations are authorized to ‘‘merge into a single corporation which shall be one of the constituent corporations,’’ known as the ‘‘surviving corporation’’ [citation]. The statute does not delineate substantive justifications for mergers, but only requires compliance with certain procedures: the adoption by the boards of each corporation of a plan of merger setting forth, among other things, the terms and conditions of the merger; a statement of any changes in the certificate of incorporation of the surviving corporation; the submission of the plan to a vote of shareholders pursuant to notice to all shareholders; and adoption of the plan by a vote of two-thirds of the shareholders entitled to vote on it [citation].

   Generally, the remedy of a shareholder dissenting from a merger and the offered ‘‘cash-out’’ price is to obtain the fair value of his or her stock through an appraisal proceeding [citation]. This protects the minority shareholder from being forced to sell at unfair values imposed by those dominating the corporation while allowing the majority to proceed with its desired merger [citations]. The pursuit of an appraisal proceeding generally constitutes the dissenting stockholder’s exclusive remedy [citations]. An exception exists, however, when the merger is unlawful or fraudulent as to that shareholder, in which event an action for equitable relief is authorized [citations]. Thus, technical compliance with the Business Corporation Law’s requirements alone will not necessarily exempt a merger from further judicial review.

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   * * * In reviewing a freeze-out merger, the essence of the judicial inquiry is to determine whether the transaction, viewed as a whole, was ‘‘fair’’ as to all concerned. This concept has two principal components: the majority shareholders must have followed ‘‘a course of fair dealing toward minority holders’’ * * * and they must also have offered a fair price for the minority’s stock. * * *

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   Fair dealing is also concerned with the procedural fairness of the transaction, such as its timing, initiation, structure, financing, development, disclosure to the independent directors and shareholders, and how the necessary approvals were obtained * * *. Basically, the courts must look for complete and candid disclosure of all the material facts and circumstances of the proposed merger known to the majority or directors, including their dual roles and events leading up to the merger proposal. * * *

   The fairness of the transaction cannot be determined without considering the component of the financial remuneration offered the dissenting shareholders. * * *

   In determining whether there was a fair price, the court need not ascertain the precise ‘‘fair value’’ of the shares as it would be determined in an appraisal proceeding. It should be noted, however, that the factors used in an appraisal proceeding are relevant here. * * * This would include but would not be limited to net asset value, book value, earnings, market value, and investment value * * *. Elements of future value arising from the accomplishment or expectation of the merger which are known or susceptible of proof as of the date of the merger and not the product of speculation may also be considered. * * *

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   In the context of a freeze-out merger, variant treatment of the minority shareholders—i.e., causing their removal— will be justified when related to the advancement of a general corporate interest. The benefit need not be great, but it must be for the corporation. For example, if the sole purpose of the merger is reduction of the number of profit sharers—in contrast to increasing the corporation’s capital or profits, or improving its management structure—there will exist no ‘‘independent corporate interest’’ [citation]. All of these purposes ultimately seek to increase the individual wealth of the remaining shareholders. What distinguishes a proper corporate purpose from an improper one is that, with the former, removal of the minority shareholders furthers the objective of conferring some general gain upon the corporation. Only then will the fiduciary duty of good and prudent management of the corporation serve to override the concurrent duty to treat all shareholders fairly [citation]. We further note that a finding that there was an independent corporate purpose for the action taken by the majority will not be defeated merely by the fact that the corporate objective could have been accomplished in another way, or by the fact that the action chosen was not the best way to achieve the bona fide business objective.

   In sum, in entertaining an equitable action to review a freeze-out merger, a court should view the transaction as a whole to determine whether it was tainted with fraud, illegality, or self-dealing, whether the minority shareholders were dealt with fairly, and whether there exists any independent corporate purpose for the merger.

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   Without passing on all of the business purposes cited by [the trial court] as underlying the merger, it is sufficient to note that at least one justified the exclusion of plaintiff’s interests: attracting additional capital to effect needed repairs of the building. There is proof that there was a good-faith belief that additional, outside capital was required. Moreover, this record supports the conclusion that this capital would not have been available through the merger had not plaintiffs’ interest in the corporation been eliminated. Thus, the approval of the merger, which would extinguish plaintiffs’ stock, was supported by a bona fide business purpose to advance this general corporate interest of obtaining increased capital.

   Accordingly, the order of the Appellate Division should be affirmed.